Ask the Experts November 10, 2020

Governmental 403(b) Plan Notice of Investment Lineup Changes

Experts from Groom Law Group and Cammack Retirement Group answer questions concerning retirement plan administration and regulations.

Reported by

“I work for a public higher education institution that sponsors a 403(b) plan and is in the process of making changes to the plan’s investment lineup. Are there any federal or state laws requiring participant notification of these changes?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news. 

Odd as it may sound, technically there are no federal laws requiring participant notification when a 403(b) plan sponsor changes its investment fund lineup. The Department of Labor (DOL) requires plan sponsors of Employee Retirement Income Security Act (ERISA)-covered plans to provide to plan participants and beneficiaries advanced notice of any changes to a plan’s investment lineup. See CFR section 2550.404a-5(c)(ii) (plan administrators are required to notify each participant and beneficiary of any changes to the investment options available under a plan, as well as any related fee changes, 30 to 90 days prior to the change taking effect.) However, because ERISA does not apply to governmental plans, such as governmental 403(b) plans, the regulations concerning participant notification promulgated under ERISA are inapplicable to your plan.

As such, you would need to review state statutes to determine whether there are any applicable notice requirements. If there are none, then you may do what you wish with respect to participant notification. However, keep in mind that investment providers may require a minimum participant notice period as part of their service agreement so that fund changes can be effectively implemented.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.